Foreign Direct Investment Statistics

from Country Commercial Guide (US Embassy)

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Foreign investment interest in Indonesia has fallen substantially since the onset of the economic crisis in mid-1997. According to statistics from the Capital Investment Coordinating Board (BKPM) from 1967 through 1998, the GOI approved over 6,500 foreign investment applications worth more than US$ 216 billion; over half were approved after 1993. As an indicator of the severe downturn in foreign investor interest, while foreign investment approvals reached almost US$ 30 billion in 1996, and US$ 34 billion in 1997, they totaled less than US$ 14 billion in 1998. The declining trend has continued into 1999. Recent statistics showed that foreign investment approvals fell by 80 percent in the first quarter of 1999 compared to the same period in 1998.

Investment approvals decreased in every sector. In 1997 the chemical industry, which includes oil refineries, attracted US$ 13.3 billion in approved investment applications, but in 1998 the figure was only US$ 6.2 billion. In percentage terms, the chemical industry accounted for 445 percent of approvals, by value, infrastructure (electricity/gas/water) for 13 percent, and housing for 9 percent. Metal goods and the pulp and paper industry rounded out the top five. Foreign investment in oil, gas, mining, banking and insurance all fall outside BKPM's purview; there are several billion dollars more annual foreign investment in these sectors.

Realized foreign investment fell as well. According to BKPM's tentative estimates, realized foreign investment fell from US$ 10.4 billion in 1997 to US$ 2.9 billion in 1998. Bank Indonesia data on foreign capital investment also showed a significant decline. According to Bank Indonesia, the inflow of direct foreign capital investment fell from US$ 4.7 billion in 1997 to US$ 930 million in 1998.

Japan is the largest cumulative foreign investor in Indonesia, excluding the oil/gas sector, where the United States is the leading investor. Between 1967 and 1998, BKPM- approved Japanese investment applications reached some US$ 42.5 billion, 20 percent of the total. Indonesia Petroleum, one of Indonesia's largest companies, is a Japanese joint venture, as is the largest automobile manufacturer, P.T. Astra. Japanese partners also figure heavily in the pulp, paper and petrochemicals industries. In 1998, however, the U.K., not Japan, had the highest value of approved projects with US$ 4.8 billion.

According to Indonesian government statistics, The United States ranks fifth in cumulative BKPM-approved investment since 1967, with a total of US$ 12.5 billion, although not all approved investment was realized. Not included in the investment figure is substantial U.S. investment in Indonesia's hydrocarbon sector. In 1998, Caltex (Chevron and Texaco) retained its position as Indonesia's number one oil producer, with close to half of crude and condensate output. It was followed by several other U.S. companies including Conoco, Unocal, Arco, Mobil, and Vico. According to Ministry of Mines and Energy data, petroleum companies planned to spend US$ 6 billion in 1998 on exploration and development.

According to the Ministry of Mines and Energy, investment in Indonesia's mining sector totaled US$ 10.8 billion over the last 30 years, with U.S. companies accounting for US$ 6.4 billion. U.S mining company P.T. Freeport Indonesia, an affiliate of the U.S. mining firm Freeport McMoRan, is one of the largest foreign investors in Indonesia and accounted for the bulk of investment in the mining sector. Recently, Freeport voluntarily agreed to increase royalties on copper and gold production under its fifth-generation COW in return for GOI approval to increase ore output at its mine in Irian Jaya.

Another significant investor in Indonesia's mining sector is Denver-based Newmont Mining Company, which operates a gold mine in North Sulawesi and plans to open its US$ 1.8 billion Batu Hijau copper and gold mine on Sumbawa Island in the last quarter of 1999.

Major U.S. companies produce consumer and other products and provide services for the domestic market. General Motors has built a US$ 110 million vehicle assembly, and General Electric Capital Corporation and Ford Credit are both active in automobile financing joint ventures. In 1996, General Electric opened the first locomotive factory in Southeast Asia and created the second largest lighting company in Indonesia. In 1998, H.J. Heinz Co. formed H.J. Heinz ABC Indonesia by purchasing a majority share in P.T. ABC Central Food company. Also in 1998, Newbridge Capital purchased Astra Microtonic Technology microchip factory in Batam.

Several U.S. independent power producers (IPPs) have invested in Indonesia's electric power sector. Although the government was forced in 1997 to put on hold a number of the IPP projects, some such as Unocal's geothermal plant in West Java and U.S El Paso's gas-fired plant in South Sulawesi are currently in operation others such as Edison Mission Energy's large coal-fired plant in Paition, East Java are close to completion.

In addition to Japan, the UK, and the United States, Indonesia's other major foreign investors include Hong Kong, Singapore, the Netherlands, Taiwan, and South Korea.

source: US Embassy report